Posted on 07/27/2013 6:06:29 AM PDT by SeekAndFind
The City of Detroit tried to file for bankruptcy last week. A state judge initially blocked the filing, but a federal judge ruled Wednesday this week that the bankruptcy case can move forward. More legal maneuvering is ahead and Detroit may well succeed in the end. After all, Detroit owes somewhere in the neighborhood of $18 to $20 billion to over 100,000 creditors. One group of creditors particularly wary of a municipal bankruptcy is Detroit’s public sector labor unions. They fear a bankruptcy judge might allow the city to cancel or reduce their pension or retiree health benefits. The unions have a lot of law on their side, but they are still right to be worried.
More importantly, this situation should serve as a warning to every person expecting to retire one day and collect a pension or other retirement benefits: do not trust other people with your future.
Detroit’s city workers have two significant legal advantages compared to many workers. First, Michigan’s state constitution specifically protects workers’ pensions from being reduced. Second, Michigan state law requires public pension obligations to be fully funded every year. That means the only reason Detroit may owe money in pension obligations is because the emergency manager thinks the city used favorable actuarial math in the past to save some money. In general, Detroit’s city workers have pension funds that are better funded than most workers. Yet, by some estimates, Detroit’s pension fund is as much as $3.5 billion short of what is needed to pay promised benefits.
For many reasons, Detroit’s bankruptcy, if a judge eventually allows them go through that process, will not set much of a precedent for other cities. As mentioned, Michigan law protects public sector workers more than the law in most states.
(Excerpt) Read more at forbes.com ...
Also, it is highly unlikely another city of Detroit’s size will go bankrupt any time soon.
Detroit has something others don’t - Howdy Doody. Sell him, and a bunch of other assets from DIA, and there’s the extra money for the union goons. La la la.
What’s Social Security have to do with Detroit? SS is a federal entitlement and when the Feds run out of money, unlike Detroit ,they can just print more.
The author doesn't understand the meaning of that amendment.
All it means is a city or the state government can't vote to reduce an already earned pension.
Once bankrupt it is under federal control and that amendment is meaningless. The city then is controlled by a fed judge who can and will reduce those pensions to a manageable level.
Exactly right. Whether through grants or fed bailouts the money has to come from somewhere. In the end it’s from the sucker taxpayer. True the fed can print more money but eventually the Chinese and Europeans will figure out it’s just worthless confetti , then the excrement will really impact the air movement device.
Laws don't create money.
The author is an idiot.
Math has no mercy.
I remember reading this after the Enron scandal when those retirees were wiped out:
“As sad as the situation is, let Enron be a lesson to us all: Do Not Put All of Your (so-called) Eggs Into One Basket.”
IOW, make sure that by your retirement years you have more than one source of income to rely on — diversify, diversify, diversify — IRAs, 403bs, 401ks — along with non-dollar assets like gold and silver
I fear for those solely reliant on SS — I also fear that the government is going to come in and confiscate private retirement accounts to prop up SS in return for a “guaranteed income.”
SS is a federal entitlement and when the Feds run out of money, unlike Detroit ,they can just print more.
Printing money has been working just fine quite some while. As long as the dollar is devalued fairly slowly, most people don't notice the gradually rising cost of everything. Altering the way the cost of living is calculated makes it easier for the feral government to disguise the effects of devaluation. Stupid? No. Malicious? Yes.
“After the GM precedent those folks are screwed.”
I’m of the age where the common wisdom is to get out of stocks and invest in bonds. After GM I told my investment manager I didn’t want anything that even held a fraction in bonds.
Obama has dramatically changed the ability of cities to borrow. (Which, I think, is a good thing.)
Exactly.
Its also foolish to declare that other cities wont go bankrupt. Other cities are already seeking and getting bailouts through other means. Chicago is already dumping their union health care costs in to Obamacare so we the taxpayer can pick up the tab. Gary Indiana is seeking state police help to police their city so the taxpayers of Indiana can pick up that tab.
RE: Laws don’t create money.
Ahh... but the Fed does... out of thin air.
Go ahead - trust your political representative.
Hahahahahahaha.....
stop it, he’s on a roll
Go ahead - trust your political representative.
I believe we can trust our elected misrepresentatives to cheat us, lie to us, live high on the hog at our expense, and keep "paying" for their spree by devaluing our dollar.
when I was growing up, no one wnated a government job, it was viewed as dull boring and low paying. Now government jobs are the plums
just one little problema
we can’t afford to pay people to sit on their ass, bully us and collect huge pensions
He is saying Detroit is symptomatic of many entities. If you rely on someone else for your retirement, including the Federal Government, you may end up losing your anticipated nest egg.
The “3 legged stool” retirement planning approach is rapidly leaving us. I have never counted on Social Security as part of my planning. I will have a modest pension but the majority of it is up to ME.
I committed years ago to learn about investing in the stock market, options, etc. Have I made mistakes along the way? Sure. But I feel more comfortable controlling my own destiny than relying on promises that are wobbly at best and can evaporate when I become frail. Investing like that is not for everybody..but I don’t want to have to depend on government or my former company’s continued business fortunes to secure my own future.
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